Ethiopia: Government have the lowest point with the IMF

Addis Ababa (HAN) September 30, 2014 – Expert Analysis, Your Power & Regional Influence Magazine, opinion page by Editorial Addis Fortune. The lowest point in the relationship of the Ethiopian government with the IMF, according to Neway, chief economic advisor to the Prime Minister, claims gossip.

According to Geeska Afrikam Online Archives in January 2013: A national body, styled on the United State’s National Economic Council, has been launched by the administration of Prime Minister Hailemariam Desalegn, aka Haile, comprising of two ministers and one senior advisor, to begin with. Debretsion Gebremikael (PhD), minister of Communications & Information Technology, has been appointed to chair the country’s first such council, which has been on blue print since the beginning of the last days of the late Meles Zenawi. Sufian Ahmed, minister of Finance & Economic Development (MoFED), and Neway Gebreab, chief economic advisor to the Prime Minister, have been selected to serve as members. Both are old hands in the EPRDF government, serving the administration up at Lorenzo Te’azaz Road for nearly two decades. They are also members of the macro-economic team, chaired by the Prime Minister, and responsible for fiscal and monetary policy making.

The Revolutionary Democrats could get hard-headed, thus a source of frustration to their earnest friends here and abroad, gossip observed. Often deeply ideological and at times distrustful of the intent of advices made to them, they are perceived of being resistant to policy recommendations coming from their international development partners.

Those assigned by international finance institutions and national cooperation agencies know this far closer than anyone, claims gossip. Gossip recalls the Country Director of the World Bank for Ethiopia and Sudan few years ago; the Japanese Ken Ohashi had had little incentive from the Revolutionary Democrats in order to engage them quietly, and subsequently pushed to ventilate his frustration in public.

This time, the turn appears to be for the International Monetary Fund (IMF); many of its resident representatives have gone back to their headquarters, in Washington DC, displeased with their hitting on the wall with their advices and recommendations. The Danish Jan Mikkelsen completed his term in Ethiopia last week, leaving behind an office with “sour taste in the mouth,” as Neway Gebreab once remarked on the rather rutted relationship his government has had with the IMF, claims gossip.

It is not the first time for the Ethiopian government to have lowest point with the IMF, gossip recalls. Back in the 1990s, the IMF had suspended 80 million SDR – a technical term for the IMF as special drawing rights, equivalent to 119.2 dollars – because its technocrats in Washington, DC were not pleased with the conduct of the Ethiopian authorities on two issues, according to gossip.

The newly installed administration of the late Meles Zenawi was interested to use funds obtained from international aids in the national budget. That was long before the introduction of direct budget support or its offspring, protection of basic services(PBS). The IMF bounced back, arguing that the government should depend on its own domestic resource mobilization – to mean tax – than aid, which they saw was unpredictable. Although quietly, they came back to this a decade later, where they successfully pushed Ethiopia to be able to finance more than 70pc of its recurrent budget from its own sources.

Another sticky point was a loan Ethiopia took back in the military era to acquire two aircrafts from the American Boeing. The new rulers had felt the loan terms and interest rates were unfavorable to the country, thus had wanted to pay the debt in full long before the scheduled completion date. Again, the IMF was unhappy, arguing that such a move would have depleted the nation foreign currency reserve.

That was the lowest point in the relationship of the Ethiopian government with the IMF, according to Neway, chief economic advisor to the Prime Minister, claims gossip.

Yet, the IMF chose to keep its office open and continued to send its resident representatives, albeit in limited staff and with no substantive program, gossip recalls. Nonetheless, differences in macroeconomic policy directions lingered particularly on issues of budget deficits, national debts, prioritisation of mega national projects, and the crowding out effect on the private sector in accessing credit, according to gossip. None of this has been issues where the Revolutionary Democrats are seen willing to budge, gossip observed.

Despite positive remarks on Ethiopia’s “continued robust growth and containment of inflation to single digit,” the IMF remains frustrated that its series of recommendations for the government to develop a consolidated fiscal position, introduction of flexible treasury and exchange markets, reconsideration of state investments in mega projects and broadening credit to the private sector have not been taken positively.

The result appears to be a decision to downsize its presence in Ethiopia to a one staff office run by a local, gossip disclosed. The IMF will not send a resident representative for the first time in two decades, and there will not be a replacement to Mikkelsen, gossip claims.

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